Sluggish Car Demand Keeping North American Plants from 100% Capacity
Several plants building cars will stay below full capacity, even with light-vehicle sales expected to continue hefty year-over-year gains in the first six months of 2016.
![Sluggish Car Demand Keeping North American Plants from 100% Capacity Sluggish Car Demand Keeping North American Plants from 100% Capacity](https://eu-images.contentstack.com/v3/assets/blt7121b6ec5c11097b/blta17b2a46bf148792/661984dd092eb807e225001c/nautil1601.png?width=1280&auto=webp&quality=95&format=jpg&disable=upscale)
Low gasoline prices are helping fuel record sales in North America, and several assembly plants building trucks, particularly CUVs and pickups, are busting at the seams to keep up with demand.
However, while low fuel prices are pushing buyers to trucks, cheaper gasoline is having the reverse effect on car output. Several plants mostly or solely building cars are below full straight-time capacity and forecasted to stay there, even with light-vehicle sales, particularly in the U.S., expected to continue hefty year-over-year gains in the first six months of this year.
The drag caused by cars means total LV output will grow by a tepid 1% in first-half 2016 from like-2015, including a slight decline in Q1. However, some temporary slowdowns for tooling changes at a few factories, including some building trucks, also are contributing to the January-March shortfall as well.
Slower output means the industry in Q2 2016 will not quite get to 100% capacity utilization on a rolling 12-month basis for the first time ever, as WardsAuto expected it to three months ago. (Capacity utilization is the percentage of production against what each assembly plant can build in a typical 5-day workweek on two shifts per day.)
A quarterly string of year-over-year declines in car production that began in Q3 2015 will continue at least through Q2 2016. Car output is forecast to decline 6.5% in Q1 from like-2015, and by another 1% in Q2 2016.
Consequently, North American LV capacity utilization, although still at a very healthy level, will decline year-over-year in Q1 2016 for the first time since Q1 2015, and for only the third time in the 18 quarters leading into the current period.
Capacity utilization is forecast at 99.2% in January-March 2016, slightly below year-ago’s 99.9%, but will rebound to another increase in Q2 – 105.0% vs. like-2015’s 104.2%.
The 12-month rolling average – used to smooth out seasonal volatility – will decline slightly in Q1 2016 from Q4 2015 to 99.6%, but continue to grow in the second quarter, nudging the 100% level by topping out at 99.8% in June.
Capacity utilization for 2015 finished at an all-time calendar-year high of 99.8%, up from 98.4% in 2014.
Assembly plants in both the U.S. and Mexico topped 100% capacity utilization in 2015, both increases from 2014, while Canadian factories slid to 88.5% from 92.9% in 2014.
Manufacturers posting utilization increases in 2015 from 2014 included BMW, Daimler, Ford, General Motors, Honda, Kia, Mazda and Nissan. Fiat Chrysler, Hyundai, Mitsubishi, Subaru, Toyota and Volkswagen recorded downturns.
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